Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia
SME fintech lenders Moula and Prospa have been bought into a landmark government guarantee scheme – the Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme – that will see up to $40 billion in lending make its way to Australia’s hard-hit SME sector in the coming months.
The announcement has the potential to transform the two lenders into ‘household names’ in the SME finance space, marking a significant new turning point for both fintechs.
As part of the history-making COVID-19 stimulus measures in Australia, the government will look to guarantee 50% of new loans issued by participating lenders to SMEs.
Loans will be unsecured, and come with a 6-month repayment holiday. The borrowing limit under the scheme will be capped at $250,000, and all lenders will use their usual discretion in setting lending limits.
The push to keep SMEs afloat is being complemented with the government’s JobKeeper program. Eligible SMEs – namely those that can demonstrate a turnover reduction of 30% or more – will be entitled to access a fortnightly subsidy of $1500 per eligible employee, to keep paying their employees. The program runs until September of this year.
Another large Australian neobank, Judo Bank, has also been added to the list of approved lenders.
Many fintech lenders are significantly more expensive than traditional banks, however there is potential now for non-bank lenders to revaluate their risk/reward matrix, and strongly compete. There is no doubt speed of financing is key in the current environment, and it is arguable fintechs already have a leg-up in this regard.
However the competition – traditional banks – aren’t going to waste a good crisis either. NAB’s COVID-19 business loan is priced at the very attractive 4.5% p.a. As a bank emerging out of a series of high profile, brand damaging moments over the past two years, due to the Royal Commission, being able to execute over the next 12 months will be key to winning back market share and trust for the blue chip.
This competition is definitely going to get interesting, and SMEs will be the winner.
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